Reversing Rapids Co. purchases an asset for $166,885. This asset qualifies as a

Question

Reversing Rapids Co. purchases an asset for $166,885. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has a tax rate of 30%. The asset is sold at the end of year 4 for $10,432, what is the cash flow from disposal? Calculate gain or loss on disposal. Gain should be entered as a positive number. Loss should be entered as a negative number. Round the answer to two decimals.

Explanation / Answer

Asset costs $ 166,885.00 Less: Depreciatioon charged $ 138,047.27 WDV of machine at project ending $    28,837.73 Sale value of machine $    10,432.00 Profit on sale $ (18,405.73) Less: Tax on sale@30% $    (5,521.72) After tax cash flows from sale of asset $    15,953.72

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